A NEW WAY OF LOOKING AT TRADE Asia’s Advantage amid Changing Global Trade Yu-Ming Wang, Global Head of Investment & CIO, International Nikko Asset Management Co., Ltd. 2017/02/20 For Qualified Institutional Investors Only en.nikkoam.com
CONFIDENTIAL – NOT FOR REDISTRIBUTION
EXPORTS FROM US, CHINA AS SHARE OF GLOBAL TOTAL (1996-2015) China has surpassed USA as #1 exporter
16.0%
USA, China Exports: Share of Global Total
14.0% 12.0%
China
10.0% 8.0%
USA 6.0% 4.0% 2.0% 0.0%
Source: World Trade Organization
Confidential – Not For Redistribution. This material must be read in conjunction with the ‘Important Information’ statement on the last page 2
IMPORTS OF US, CHINA AS SHARE OF GLOBAL TOTAL (20002015) USA still biggest market for exporters, but gap with China shrinking
Imports as Share of Global Total 20.0% 18.0% 16.0%
USA importsfrom world
14.0% 12.0% 10.0%
USA excluding NAFTA
China imports from world
8.0% 6.0%
China excluding EU+NAFTA
4.0% 2.0% 0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: World Trade Organization
Confidential – Not For Redistribution. This material must be read in conjunction with the ‘Important Information’ statement on the last page 3
SERVICE IMPORTS OF US, CHINA AS SHARE OF GLOBAL TOTAL (2005-2015) Service imports: China has caught up with USA
14.0%
Service Imports as Share of Global Total
12.0%
USA 10.0%
8.0%
6.0%
China
4.0%
2.0%
0.0% 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: World Trade Organization
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MAJOR DESTINATIONS FOR ASIAN EXPORTS
China #1 destination of exports from Asian countries
Asia’s Main Export Markets China imports* from
ASIA EXPORTS TO JAPAN 12% ASIA EXPORTS TO EU 24%
ASIA EXPORTS TO USA 20%
ASIA EXPORTS TO CHINA 44%
KOREA
133,796
TAIWAN
111,314
JAPAN
109,364
SINGAPORE
88,328
AUSTRALIA
61,245
MALAYSIA
25,983
THAILAND
23,796
VIETNAM
16,049
INDONESIA
15,028
INDIA
12,289
PHILIPPINES
6,393
NEW ZEALAND
6,047
*USD, millions Source: World Trade Organization; Korea, Taiwan, Philippines, Vietnam, Thailand, Malaysia, Indonesia, Singapore, India trade with China as of 2015.
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BREAKDOWN OF RETAIL PRICE OF APPLE IPHONE7
Real “Gold” in value chain’s intellectual property; still mostly sitting in Silicon Valley
Apple iPhone7 Retail Price=USD 658
Apple USD 257 (39%)
Distribution USD 86 (13%)
Materials USD 265 (40%)
Taiwan USD 61 (9%) Korea USD 40 (6%) EU USD 7 (1%)
Assembly USD 6 (1%)
Miscellaneous USD 44 (7%)
USA USD 70 (11%) Japan USD 46 (7%) China USD 12 (2%)
Other USD 29 (4%)
Source: Nikko AM; estimates based on proprietary research; proportion of non-material cost components based on assumption that proportions would be similar to those of iPhone4
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TOTAL PATENTS FILED SINCE: CHINA, USA & JAPAN (2000-2015)
China has surpassed USA in patent filing
Thousands
Total Patents Filed 1200
1000
China 800
USA
600
400
Japan 200
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: World Trade Organization Confidential – Not For Redistribution. This material must be read in conjunction with the ‘Important Information’ statement on the last page 7
DOMESTIC R&D SPENDING OF 5 MAJOR ECONOMIES (20002015) Domestic R&D Spending (% of GDP) China R&D 4.5 spending 4 recently Korea surpasses 3.5 Japan Europe, 3 closing in USA on USA 2.5 China 2
EU28 1.5
1
0.5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: World Trade Organization Confidential – Not For Redistribution. This material must be read in conjunction with the ‘Important Information’ statement on the last page 8
JOURNAL ARTICLES CITING “DEEP LEARNING”, “DEEP NEURAL NETWORK” China catching up in cuttingedge sectors (e.g. AI)
Journal articles cited at least once, mentioning “deep learning” or “deep neural network”, by nation. Source: National Artificial Intelligence Research and Development Strategic Plan, National Science and Technology Council; search of the Web of Science Core Collection for "deep learning" or "deep neural net", limited to publications receiving one or more citations, retrieved 30 August 2016. Confidential – Not For Redistribution. This material must be read in conjunction with the ‘Important Information’ statement on the last page 9
FACTORS WORKING IN ASIA’S FAVOUR
─ Population (especially middle income) drives growth
─ Size of domestic market enables creation of multinational giants ─ Threats of trade war have limit: Asia not solely dependent on US trade
─ Real trade war is for intellectual property, talent, innovation
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